A skills audit of selected Pietermaritzburg small medium enterprise (SME) owner-managers : a critical assessment.

Abstract

Small Medium Enterprises (SMEs) are important contributors to the South African economy and are drivers for reducing unemployment, especially when the formal sector continues to shed jobs. However, for SMEs to be successful, sustainable and to grow, they need to operate efficiently and productively in order for them to achieve a maximum contribution to national as well as provincial economies. Most studies have shown that, on average, 50% of the small businesses that are started eventually fail in two years of being established. The high failure rate of Small Medium Enterprises (SMEs) has been blamed among other things on the lack of managers’ skilfulness. A study that was conducted by the World Bank (2012) revealed that 82% of start-ups fail within the first two years, not only because of the external factors such as economic conditions, but rather due to a lack of technical and managerial expertise. This situation is also true in South Africa as the failure rate of SMEs is between 70 to 80% and most of these failures are caused by lack of managerial and entrepreneurial skills that are vital for Small Medium Enterprise development. The motivation to this research study was to conduct a skills audit for owner-managers of some established Small Medium Enterprises (SMEs) in Pietermaritzburg. The targeted population was owner-managers of selected SMEs in Pietermaritzburg who were registered members of the Pietermaritzburg Chamber of Business (PCB). A non-probability sampling technique incorporating census sampling and snowballing was adopted for the purposes of this research. Due to a low response rate, a switch from census sampling to snowball-sampling technique was made. This study was quantitative in nature and primary information was obtained through the use of questionnaires. The questionnaires were pilot tested before the actual data collection to test for its validity. The computer software called Statistical Package Sciences (SPSS) Version 22 was used for data analysis. The results indicated that most owner-managers had more communication competency compared to the other skills (accounting, finance and bookkeeping, management, marketing and technological skills). Even though most owner-managers agreed that they were competent in one way or the other, the results of this study also showed that most Pietermaritzburg owner-managers commented that poor management of finance is one of the most common causes of business failure. Poor general management was highlighted as the second most common cause for businesses to fail in this study, thereby reflecting that most Pietermaritzburg owner-managers agreed that poor management of businesses is causing most business failures. The results of this study could help prevent future business failure rates by adding information to the existing body of knowledge. Recommendations on steps to match the available skills to the required skills can help government, educational institutes and businesses to provide improved and appropriate training and development to owner-managers of SMEs to bridge the skills gaps that are prevalent. These recommendations included that sole proprietors and partners need training in accounting and finance management skills as they showed a considerable lack of competency. Pietermaritzburg owner-managers were also advised to make use of inexpensive ways of marketing like the use of social media platforms, exhibitions and networking. It was also recommended to Pietermaritzburg owner-managers to apply appropriate technologies in their businesses to enhance the growth of their enterprises. A recommendation was made to all SME owner-managers in Pietermaritzburg to make use of government initiatives that are available to support small businesses. Organisations like Small Enterprise Development Agency (Seda) and the Department of Trade (DTI) are also available to provide support to small businesses in every sector. From literature reviewed and the findings of this research study, the advice was given to owner-managers to constantly develop their management skills through training in order for them to remain abreast of the ever-changing business environment that would require a different way of doing things.